JPMorgan Agrees To Pay $264 Million Fine For 'Sons And Daughters' Hiring Program In China

Over a seven year period between 2006 and 2013, JPMorgan hired about a hundred interns and full time employees at the request of government officials in China and Asia as part of its efforts to build banking relationships in the fast-growing region. The hiring, dubbed internally as a "Sons & Daughters Program," enabled JPMorgan to win business that generated $100 million in revenues for the bank.

But now America's largest bank by assets is set to pay a $264 million fine to settle claims that its hiring violated the Foreign Corrupt Practices Act (FCPA). On Thursday afternoon, JPMorgan agreed to pay $264 million to settle claims of FCPA violations with three regulators, split between a $130 million payment to the Securities and Exchange Commission, a $72 million fine to the Department of Justice, and a $61.9 million fine to the Federal Reserve.

In an order issued by the SEC, the regulator accuses investment bankers at JPMorgan’s Asian operations of creating a program that bypassed the firm’s normal hiring process and gave top jobs at JPMorgan to candidates referred by client executives or influential government officials. The program, operated for seven years, helped JPMorgan win business mandates in China and other parts of Asia. Ultimately, it generated $100 million in revenues for the bank before being shuttered.

“JPMorgan engaged in a systematic bribery scheme by hiring children of government officials and other favored referrals who were typically unqualified for the positions on their own merit,” Andrew J. Ceresney, director of the SEC Enforcement Division, said in a statement. “JPMorgan employees knew the firm was potentially violating the FCPA yet persisted with the improper hiring program because the business rewards and new deals were deemed too lucrative,” he added.

Kara Brockmeyer, who heads the SEC's FCPA enforcement efforts, noted that “the misconduct was so blatant" at JPMorgan its bankers created ‘Referral Hires vs Revenue’ spreadsheets to track the money flow from clients whose referrals were rewarded with jobs. Brockmeyer further adds no referral into the JPMorgan program was ever denied a job.

Initially, the SEC and Department of Justice's investigation into JPMorgan's hiring practices in Asia seemed like it could lead to criminal charges against the bank, its subsidiaries or executives. However, JPMorgan appears to have co-operated during the investigation, minimizing settlement amounts and the gravity of action against the bank.

"We’re pleased that our cooperation was acknowledged in resolving these investigations," JPMorgan spokesperson Brian Marchiony said in an emailed statement. "The conduct was unacceptable," Marchiony added, before noting the bank took actions against the individuals involved in the program after its closure.

"We have also made improvements to our hiring procedures, and reinforced the high standards of conduct expected of our people," Marchiony said and noted the bank's commitment to the Asia-Pacific region "is as strong as ever."

JPMorgan shares rose 0.8% on Thursday, closing at $78.02, within reach of record highs hit earlier in November.

Shares in JPMorgan and other banks have rallied sharply since the election of Donald J. Trump last week given his growth-oriented economic agenda. In the day's after the election, JPMorgan CEO Jamie Dimon's name was floated as a potential Treasury secretary in the Trump administration, however, a source familiar with the matter says the outspoken CEO is not planning to leave the bank.